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Senator Spilka Votes for More Competition, Lower Electricity Costs

April 5, 2012

BOSTON – Continuing its efforts to remove obstacles for businesses to grow, the Senate on Thursday took on the high costs of electricity in Massachusetts by unanimously passing legislation that will create more competition for energy contracts and bring down prices, Senator Karen Spilka announced.

“As chair of the Jobs Creation Commission, I’ve heard time and time again that the cost of energy in the Commonwealth hampers the ability for business to grow and create more jobs,” said Spilka. “I am pleased that the Senate took action by passing this bill, which will provide relief to residents and businesses while promoting continued investment and growth in our renewable energy sector.”

“We’ve streamlined our economic development model, lowered corporate tax rates, given businesses tools to negotiate lower health insurance rates, and once again have frozen the unemployment insurance rate, but the high cost of electricity continues to be a burden on consumers and businesses,” Senate President Therese Murray (D-Plymouth) said. “We want to lift that burden and eliminate the drag these costs are putting on our economic recovery.”

Because of its ongoing commitment to renewable resources, the Commonwealth has the second-lowest greenhouse gas emissions of any region in the nation. It has positioned itself as a frontrunner in the clean energy economy, which currently employs 64,000 people statewide, and become one of the top states for innovation, investment, employment and policy.

The state needs to maintain this position without harming the many successful businesses for which electricity is a detrimental cost of doing business.

The average electric rate in Massachusetts is 14.24 cents per kilowatt hour – the seventh highest in the United States and well above the national average of 10 cents. Part of the reason is that Massachusetts, in comparison to other parts of the country, does not have an abundance of natural resources such as coal or gas. In fact, New England states in general have very little domestic sources of fuel for electricity.

But the high costs are also driven by the industry itself – a combination of aging transmission and distribution infrastructure, and a lack of accountability from investor-owned utility companies.

The bill passed in the Senate on Thursday addresses the high cost of electricity in Massachusetts in an effort to support job creation and economic recovery. It seeks to reduce the price of electricity by identifying cost-drivers, reviewing rates on a more regular basis, and demanding more competition.

To establish competition in the market, the bill would end the current long-term contract program under the Green Communities Act by December 2012 and require investor-owned utilities to competitively bid proposals from renewable energy suppliers for long-term renewable energy contracts. And by increasing the overall net metering cap from 3 percent to 6 percent, the legislation doubles the existing limits on municipal and privately-owned projects that generate their own renewable energy.

The legislation requires gas and electric companies to file rate cases every three years with DPU; increases from six to 10 months the time DPU has to review rate cases; prevents DPU from approving rate case settlements more than once every six years; and requires DPU to spread over a two-year period any rate increase that would exceed 10 percent in one year, with a first-year cap of 7.25 percent.

The bill also requires the Department of Energy Resources (DOER), when it intervenes on cases before the Department of Public Utilities (DPU), to do so on behalf of all commercial and industrial ratepayers.

The legislation also does the following:

Clarifies current law regarding solar and wind property tax classifications;

Expands DPU’s oversight to any transaction involving a regulated company, not just Massachusetts-regulated companies;

Establishes a voluntary energy efficiency pilot program for the five largest electric and five largest gas users in each utility’s service territory; and

Allows hydroelectric power to count toward the Commonwealth’s renewable and alternative energy generation goals under the Green Communities Act.